a.
Total reserve ratio = required reserve ratio + excess reserve ratio
= 10% + 2%
= 12%
Money multiplier = 1 / total reserve ratio
= 1 / 12%
= 1 / 0.12
= 8.33 (Answer)
b.
U-3:
This is the unemployment rate where discouraged and part-time unhappy unemployment are eliminated. Therefore, only those people jobless but are actually searching jobs are considered.
Unemployed = 25 million
Labor force = Full-time jobs + Part-time jobs (happy) + Unemployed
= 200 + 45 + 25
= 270 million
U-3 = (Unemployed / Labor force) × 100
= (25 million / 270 million) × 100
= 9.26%
U-6:
This is the unemployment rate that includes all types of unemployment that are not included in U-3.
Unemployed = Jobless and actively seeking + Part-time unhappy + Stopped working + Discouraged
= 25 + 50 + 10 + 20
= 105 million
Labor force = Full-time jobs + Part-time jobs (happy) + Unemployed
= 200 + 45 + 105
= 350 million
U-6 = (Unemployed / Labor force) × 100
= (105 million / 350 million) × 100
= 30%
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